Serbia’s public debt remains below many European benchmarks, but the structure of government liabilities shifted further toward foreign-currency exposure during 2026 as dinar-denominated borrowing declined and euro-linked financing increased. During the first quarter of 2026, the share of public debt denominated in dinars dropped by 1.4 percentage points to 21.1%, continuing the reversal of a local-currency borrowing strategy introduced in 2012.
The change was driven by two largely balanced movements. Dinar liabilities decreased by RSD65 billion, mainly because government securities matured without being fully replaced. At the same time, foreign-currency debt increased by RSD71.2 billion, primarily through loans from international financial institutions, including financing connected with military-equipment procurement. Total public debt rose only marginally during the quarter, increasing by RSD6.2 billion, or around 0.1%, to RSD4.62 trillion at 31 March 2026. The amount represented 41.7% of estimated GDP, leaving Serbia with a relatively moderate debt burden compared with many European countries.
Foreign currency accounts for nearly four-fifths of liabilities
Behind the limited increase in total debt, however, the currency composition changed significantly. Foreign-currency liabilities reached RSD3.646 trillion, equivalent to €31.06 billion, accounting for almost 79% of total public debt. The euro represented the largest component, accounting for 61% of total debt after increasing by €582 million during the first quarter.
The higher foreign-currency share means a larger portion of Serbia’s obligations depends on foreign-exchange availability, including tax revenues converted into foreign currency, export earnings, reserves and access to international financial markets. The impact of this exposure has been limited by the dinar’s long period of stability against the euro. The National Bank of Serbia has maintained a managed exchange-rate policy, reducing valuation changes that would otherwise affect the domestic-currency value of foreign liabilities.
At the end of March, a hypothetical 5% depreciation of the dinar would have increased the domestic-currency value of foreign-currency debt by approximately RSD182 billion, excluding potential effects from inflation, economic growth or hedging arrangements. Based on the first-quarter GDP ratio, this would mechanically raise the debt-to-GDP ratio by around 1.6 percentage points. A 10% depreciation would increase the impact to approximately RSD365 billion and 3.3 percentage points of GDP.
Government securities shift away from dinar issuance
The decline in dinar debt was largely linked to changes in government bond issuance. A RSD150 billion seven-year government security matured in the first quarter, while the state issued approximately RSD70.2 billion of five-year bonds and RSD11.6 billion of 10.5-year securities. As a result, outstanding dinar-denominated securities declined by RSD68.2 billion.
Domestic euro-denominated securities moved in the opposite direction, increasing by approximately RSD9.7 billion, or €80.6 million. The government issued €200 million of 15-year euro securities, while €144.3 million of the same maturity was redeemed. Restitution bonds contributed an additional smaller increase.
Overall, debt raised through securities on the domestic market fell by RSD58.4 billion to RSD1.026 trillion. Dinar instruments still represented 76.6% of the government securities portfolio, but their share declined by 2.2 percentage points during the quarter. The difference between the high proportion of dinar securities within the bond portfolio and the much lower dinar share of total public debt reflects Serbia’s reliance on international loans and foreign-currency borrowing.
The reduction in domestic issuance also affects the development of Serbia’s capital market. Regular dinar bond issuance provides benchmarks for corporate bonds, infrastructure financing, bank lending and institutional investors. Lower issuance can reduce secondary-market liquidity and limit the availability of long-term domestic fixed-income instruments. The Public Debt Administration announced no dinar government-bond auctions for the third quarter of 2026.
International borrowing increases foreign-currency concentration
The March debt figures do not fully reflect subsequent borrowing activity, which further increased Serbia’s foreign-currency exposure. On 28 April, Serbia completed its largest international bond transaction, raising approximately €3 billion equivalent through three bond tranches issued in euros and US dollars.
The transaction included:
- €1 billion five-year bonds with a 4.25% coupon;
- €900 million 12-year green bonds with a 4.875% coupon;
- $1.25 billion ten-year bonds with a 5.5% coupon.
The dollar-denominated borrowing was swapped into euros, resulting in an effective euro funding cost of approximately 4.66% for that tranche. Investor demand exceeded €8 billion, while around €870.8 million of proceeds was used to repurchase part of a bond maturing in May 2027. The operation reduced near-term refinancing requirements and extended the maturity structure. After the repurchase, the April transaction still provided slightly more than €2.1 billion of additional gross funding, before accounting for other redemptions, issuance costs and cash-management movements.
Serbia returned to international markets in July with another €500 million six-year private placement. The bonds mature on 20 July 2032, carry a 4.75% coupon and were issued at 98.666% of face value, producing an effective yield of 5.013%. The proceeds are intended for the modernisation of the defence system, including military equipment and related technologies.
The private placement was conducted with selected institutional investors rather than through a syndicated public offering. The final yield was disclosed, but information on the size and composition of investor demand and purchaser identities was not released. The transaction will provide approximately €493.3 million before expenses, while Serbia will repay the full €500 million principal at maturity. Annual coupon payments will total €23.75 million, or €142.5 million over the six-year period.
Preliminary Public Debt Administration data showed public debt at approximately RSD4.851 trillion, or €41.3 billion, on 14 July, before settlement of the latest bond placement. The amount represented around 44.4% of GDP, compared with 41.7% at the end of March.
Defence financing adds new long-term obligations
Foreign-currency borrowing for imported defence equipment can provide a direct currency match when supplier contracts are denominated in euros. This approach avoids immediate conversion costs associated with financing foreign purchases through dinar borrowing. The financing structure differs from revenue-generating infrastructure projects. Defence assets can provide services over decades, while the six-year bond issued in July requires refinancing or repayment before the end of the equipment’s potential useful life.
Unlike commercial infrastructure assets, defence spending does not generate dedicated revenues for debt servicing. Repayment depends on general government revenues or future borrowing capacity. Loans linked to equipment purchases may include competitive interest rates, grace periods, export-credit support, supplier conditions or sovereign guarantees. The currency denomination alone does not determine the overall cost of financing.
Serbia’s broader investment programme includes major spending on roads, railways, energy projects, the Belgrade metro, Expo 2027 and defence. International markets can provide financing volumes more quickly than the domestic investor base, but increased reliance on foreign borrowing makes continued access to euro funding more important.
Debt remains manageable but refinancing risks increase
Serbia’s public debt ratio remains relatively low. Debt below 45% of GDP provides a significant margin compared with the Maastricht reference level of 60% and the higher debt ratios recorded by many European Union members. Government cash balances and foreign-exchange reserves also provide additional protection against individual maturity pressures. Serbia’s credit ratings remain mixed among major agencies. S&P Global Ratings assigns Serbia BBB-minus with a stable outlook, while Fitch Ratings rates the country BB-plus with a positive outlook and Moody’s assigns Ba2 with a stable outlook. The difference between ratings helps explain euro borrowing costs in the range of approximately 4.25% to 5%. Investors continue to consider Serbia’s declining debt ratio and market access alongside institutional risks, external balances, geopolitical factors and the implementation of large public investment programmes.
Higher borrowing costs will gradually affect government finances as older, lower-cost debt is replaced with newer securities carrying coupons closer to 5%. The impact develops over time because only part of the debt portfolio matures each year. Greater dependence on foreign investors also increases sensitivity to external market conditions, including euro-area interest rates, regional risk appetite and international investor flows.
Serbia’s current challenge is therefore linked more to debt composition than immediate debt sustainability. Public liabilities remain moderate, international financing remains available and recent refinancing operations have reduced short-term maturity pressures. At the same time, the share of dinar-denominated debt has returned close to its 2012 level, domestic bond-market issuance has weakened, and new infrastructure and defence financing is increasingly concentrated in euros.
